Greece's PM promises new $14.4B austerity measures will be the last

CP

ATHENS, Greece - Greece's prime minister promised his austerity-weary countrymen on Thursday that new spending cuts planned for 2013-14 would be the last major austerity package, but insisted it was vital to remain in the euro.

Antonis Samaras, who is struggling to get his uneasy coalition partners' full support for the €11.5 billion ($14.4 billion) in cutbacks, argued that economic reforms and privatizations would restore growth after four years of deep recession.

"This is the last such package of spending cuts," Samaras told a meeting of his conservative party's officials. "The Greek economy can take no more."

Samaras' promise will sound familiar to Greeks, as previous governments have offered — and broken — similar pledges during more than two and a half years of harsh austerity measures designed to curtail huge budget deficits.

"Many of these cutbacks are difficult, painful," Samaras said. "But they are also inevitable. For without them the country would return to zero credibility and effectively leave the euro. Which would ... destroy the country."

Athens has pledged to implement the spending cuts in 2013 and 2014 under its commitments to international creditors who are keeping Greece afloat with rescue loans. Otherwise, the next €31 billion bailout payment will be suspended, forcing the country to default on its mountain of debt while struggling to pay pensions and public sector salaries. Many analysts believe Greece would then have to leave the 17-member eurozone.

After weeks of deliberations with its two centre-left junior coalition partners, PASOK and the Democratic Left, Samaras' conservative-led government says it is close to finalizing how exactly it will make the cuts. The program will be discussed with debt inspectors who are due in Athens next week and will meet with Finance Minister Yannis Stournaras on Sept. 9.

Before that, Stournaras, who is trying to fine-tune the list of cutbacks with officials from the two junior partners, will hold talks in Berlin with German Finance Minister Wolfgang Schaeuble on Tuesday, the finance ministry said.

The two-month-old government has issued no official details on the €11.5-billion package, which is expected to rely heavily on further pension and public sector pay cuts.

A meeting of the three coalition party leaders on Wednesday produced conflicting statements on the measures. Stournaras said that the "basic scenario" has been settled, and "minor, technical" details remain to be thrashed out.

But Democratic Left leader Fotis Kouvelis insisted that he strongly opposes across-the-board income cuts. His party also disagrees with reductions in local authority funding and in farmers' pensions, as well as with proposals to suspend thousands of civil servants — who are guaranteed jobs for life — on reduced pay ahead of retirement.

The party chiefs will meet again before next week's visit by the debt inspectors from the European Union, International Monetary Fund and European Central Bank, collectively known as the troika.

Once the troika signs off, the new cutbacks must be approved by Parliament, where the three coalition parties enjoy a strong majority, controlling 178 of the 300 seats.

The vote is expected to trigger protests, as labour unions and anti-austerity parties virulently oppose further austerity. Previous demonstrations descended into riots that saw extensive vandalism and destruction of property in central Athens.

Workers at Greece's Hellenic Postbank went on strike Thursday, a day after Stournaras told Parliament that the bank is no longer viable. The country's main GSEE union accused the government of trying to undermine the bank's value with a view to selling it cheap to private investors.

Company shares tumbled nearly 30 per cent Thursday, before the stock exchange indefinitely suspended trading, after bank officials said they could not make a deadline to release company results for 2011.

Greece was due to sell its 34 per cent stake in Hellenic Postbank last year, under a badly delayed privatization program intended to raise €19 billion ($23.8 billion) by 2015.